Research on carbon market price mechanism and influencing factors: a literature review

Carbon emissions trading is being used by more and more countries or regions to solve the global warming problem. The establishment of China’s carbon market mechanism is still under exploration and improvement. This paper focuses on the price determination mechanism in the carbon market. Based on the price theories, we analyze the theoretical basis of the carbon price formation and the carbon price transmission mechanism from the perspective of the agents that affect carbon price. From these angles including residents’ demands, enterprises’ actual emissions and indirect effects on residents’ demands, the government’s setting for carbon market institutions and indirect effects on residents and enterprises, as well as energy markets and financial markets, we analyze how these factors influence the carbon price. In turn, we discuss how carbon price affects the enterprise costs, energy-saving technologies and residents’ welfare. Besides, we summarize the current price mechanism of domestic and overseas major carbon markets. Finally, based on the current research on carbon price theory and its influencing factors, we also present some further directions on carbon price mechanism and influencing factors including China’s carbon market price mechanism design, the quantitative analysis of carbon price factors and improvement of carbon price theory.